GLG LIFE TECH CORPORATION. MANAGEMENT DISCUSSION & ANALYSIS For the Three and Nine Months Ended September 30, 2016 Dated: November 14, 2016

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1 GLG LIFE TECH CORPORATION MANAGEMENT DISCUSSION & ANALYSIS For the Three and Nine Months Ended September 30, 2016 Dated: November 14, 2016

2 Management s Discussion and Analysis This Management s Discussion and Analysis ( MD&A ) of GLG Life Tech Corporation is dated November 14, It provides a review of the financial results for the three and nine months ended September 30, 2016, compared to the same periods in the prior year. This MD&A relates to the consolidated financial condition and results of operations of GLG Life Tech Corporation ( we, us, our, GLG or the Company ) together with GLG s subsidiaries in the People s Republic of China ( China ) and other jurisdictions. As used herein, the word Company means, as the context requires, GLG and its subsidiaries. The common shares of GLG are listed on the Toronto Stock Exchange (the Exchange ) under the symbol GLG. Except where otherwise indicated, all financial information reflected herein is expressed in Canadian dollars and determined on the basis of International Financial Reporting Standards ( IFRS ). This MD&A should be read in conjunction with the condensed interim consolidated financial statements and notes thereto for the nine months ended September 30, 2016, as well as the annual consolidated financial statements and notes thereto and the MD&A of GLG for the year ended December 31, Additional information relating to GLG Life Tech Corporation including GLG s Annual Information Form can be found on GLG s web site at or on the SEDAR web site for Canadian regulatory filings at Significant assumptions about the future and other sources of estimation uncertainty that management has made at the end of the reporting period, which could result in a material adjustment to the carrying amounts of assets and liabilities and disclosure of contingent assets or liabilities in the event that actual results differ from assumptions made, relate to, but are not limited to, the following: determining the accrued liabilities; assessing the fair value of property, plants and equipment, biological assets, intangible assets and goodwill; the valuation of future tax assets; revenue recognition; estimate of inventory net realizable value; going concern assumption; expected useful lives of assets subject to amortization and the assumptions used in determining the fair value of stock-based compensation. While management believes the estimates used are reasonable, actual results could differ from those estimates and could impact future results of operations and cash flows. GLG has issued reports on certain non-ifrs measures that are used by management to evaluate the Company s performance. Because non-ifrs measures do not have a standardized meaning, securities regulations require that non-ifrs measures be clearly defined and qualified, and reconciled with their nearest IFRS measure. Where non-ifrs measures are reported, GLG has provided the definition and reconciliation to their nearest IFRS measure in section NON-IFRS Financial Measures. Forward-Looking Statements Certain statements in this MD&A constitute forward-looking statements and forward looking information (collectively, forward-looking statements ) within the meaning of applicable securities laws. Such forwardlooking statements include, without limitation, statements evaluating the market, statements regarding potential demand for stevia, monk fruit, and other products and discussions regarding general economic conditions and future-oriented costs and expenditures. Often, but not always, forward-looking statements can be identified by the use of words such as plans, expects or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates or does not anticipate, or believes or variations of such words and phrases or words and phrases that state or indicate that certain actions, events or results may, could, would, might or will be taken, occur or be achieved. While the Company has based these forward-looking statements on its current expectations about future events, the statements are not guarantees of the Company s future performance and are subject to risks, uncertainties, Page 2 of 33

3 assumptions and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such factors include amongst others the effects of general economic conditions, consumer demand for our products and new orders from our customers and distributors, changing foreign exchange rates and actions by government authorities, uncertainties associated with legal proceedings and negotiations, industry supply levels, competitive pricing pressures and misjudgments in the course of preparing forward-looking statements. Specific reference is made to the risks described herein under the heading Risks Related to the Company s Business and Risks Associated with Doing Business in the People s Republic of China for a discussion of these and other sources of factors underlying forward-looking statements and to those additional risks set forth under the heading Risk Factors in the Company s Annual Information Form for the financial year ended December 31, In light of these factors, the forward-looking events discussed in this MD&A might not occur. Further, although the Company has attempted to identify factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. As there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements, readers should not place undue reliance on forward-looking statements. Financial outlook information contained in this MD&A about prospective results of operations, capital expenditures or financial positions is based on assumptions about future events, including economic conditions and proposed courses of action, based on management s assessment of the relevant information as of the date hereof. Such financial outlook information should not be used for purposes other than those for which it is disclosed herein. Page 3 of 33

4 Overview We are a leading producer of high-quality stevia extracts and high-quality monk fruit extracts. While stevia has long been the foundation of our company, over the last two years we have been producing and selling monk fruit extracts to the international market. Stevia extracts, such as Rebaudioside A (or Reb A), and monk fruit extracts are used as all-natural, zero-calorie sweeteners in food and beverages. Our revenue presently derives primarily from the sale of high-grade stevia extract to the food and beverage industry; the expansion into monk fruit extracts represents an additional significant source of actual and potential revenues. Furthermore, we have expanded our product offerings and market opportunities through the supply of ingredients complementary to the natural high-intensity sweetener market under our Naturals+ product line. We conduct our stevia and monk fruit development, refining, processing and manufacturing operations through our two wholly-owned subsidiaries in China. Our stevia operations in China include four processing factories, stevia growing areas across ten growing regions, and four research and development centers engaged in the development of high-yielding stevia seeds and seedlings. Our processing facilities have a combined annual throughput of 41,000 metric tons of stevia leaf and 1,500 metric tons of RA 97, our best-selling high-grade stevia product, and 130 metric tons of high-purity monk fruit extract. Summary of Significant Accounting Policies The Company s significant accounting policies are subject to estimates and key judgments about future events, many of which are beyond management s control. A summary of the Company s significant accounting policies is included in Note 4 of the Company s annual consolidated financial statements for the period ended December 31, 2015 (the Financial Statements ). The preparation of financial statements in conformity with generally accepted accounting principles requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to our financial statements. We believe that our application of accounting policies, and the estimates inherently required therein, are reasonable. Our accounting policies and estimates are periodically re-evaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates. Basis of presentation These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). These consolidated financial statements have been prepared on a historical costs basis except for biological assets, which are stated at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting, except for information related to cash flows. These consolidated financial statements are presented in Canadian dollars, except when otherwise indicated. Page 4 of 33

5 New accounting standards issued but not yet effective IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which covers principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. In September 2015, the IASB deferred the effective date of the standard to annual reporting periods beginning on or after January 1, 2018, with earlier application permitted. We are currently assessing the impact on our consolidated financial statements along with the planned timing of our adoption of IFRS 15. IFRS 16 Leases In January 2016, the IASB issued IFRS 16 Leases, which requires lessees to recognize assets and liabilities for most leases. Application of the standard is mandatory for annual reporting periods beginning on or after January 1, 2019, with earlier application permitted, provided the new revenue standard, IFRS 15 Revenue from Contracts with Customers, has been applied or is applied at the same date as IFRS 16. We are currently assessing the impact on our consolidated financial statements along with timing of our adoption of IFRS 16. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 which replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on an entity s business model and the contractual cash flow of the financial asset. Classification is made at the time the financial asset is initially recognized, namely when the entity becomes a party to the contractual provisions of the instrument. IFRS 9 amends some of the requirements of IFRS 7 Financial Instruments: Disclosures, including added disclosures about investments in equity instruments measured at fair value in other comprehensive income, and guidance on financial liabilities and derecognition of financial instruments. The amended standard is effective for annual periods beginning on or after January 1, 2018, with earlier adoption permitted. IAS 12 Income Taxes has been revised to incorporate amendments issued by the IASB in January The amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments are effective for annual periods beginning on or after January 1, 2017 with early adoption permitted. The Company is assessing the impact of this standard. Change in accounting policies The Company has adopted the following new standards and amendments to standards, including any consequential amendments to other standards with a date of initial application of January 1, 2016: Annual improvements Annual improvements are amendments that include changes from the cycle of annual improvements project that affect four standards: IFRS 5, Non-current assets held for sale and discontinued operations ; IFRS 7, Financial instruments - Disclosures ; IAS 19, Employee benefits and IAS 34, Interim financial reporting. Page 5 of 33

6 IAS 16, Property Plant and Equipment ( PPE ) and IAS 41, Agriculture IAS 16 and IAS 41 are amended to distinguish bearer plants from other biological assets and to require bearer plants to be classified as PPE and accounted for under IAS 16. The adoption of this standard resulted in an increase of $10,691 in biological assets as of December 31, Significant Accounting Estimates and Judgements The Company makes certain estimates and judgments regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are available in the audited annual financial statements for the year ended December 31, Corporate and Sales Developments ADM, GLG Partner to Bring Low-Calorie Stevia, Monk Fruit Sweeteners to Customers Worldwide On June 6, 2016, Archer Daniels Midland Company (NYSE: ADM) and GLG Life Tech Corporation announced a new partnership to manufacture, market, sell and distribute low-calorie stevia and monk fruit sweeteners to customers around the globe. Under the terms of the agreement, GLG will produce an extensive array of low-calorie sweeteners made from stevia and monk fruit, while ADM will be the exclusive global marketer and distributor of those ingredients to food and beverage companies worldwide. Representatives of the companies had the following to say: More and more consumers are looking for healthier foods that are made with natural ingredients and taste great, said Rodney Schanefelt, Director, sugar and high intensity sweeteners, for ADM. ADM is already helping customers meet that growing demand with our comprehensive portfolio of ingredients and flavors. Now, we re expanding that portfolio even further by offering customers around the world a wide array of great stevia and monk fruit sweeteners. We are pleased to partner with GLG, which has a demonstrated advantage in developing non-gmo stevia varietals and a pipeline of future innovative products. This partnership combining GLG s capabilities and reputation as one of the largest, most trusted manufacturers of low-calorie sweeteners with ADM s global distribution capabilities and existing ingredient portfolio offers tremendous opportunities for both companies and their customers, said Brian Meadows, GLG President and CFO. Consumers are demanding healthy, delicious foods and drinks with clean labels, natural ingredients, and reduced added sugar together, ADM and GLG will be the go-to source for food and beverage companies looking to meet that demand. Partnership with MycoTechnology Corporation for Improved Taste of Stevia On January 7, 2016, GLG, in conjunction with MycoTechnology Corporation ( MycoTech ), together announced a commercial partnership agreement to incorporate MycoTech s ClearTaste product to improve the taste of stevia and monk fruit. The partnership combines GLG s strengths in the natural sweetener space with the benefits of MycoTech s innovative ClearTaste product, a certified USDA organic bitter blocking technology, in order to improve the taste of stevia and monk fruit. There is a major trend underway in which mass produced, low nutritional quality foods, loaded with added sugar, salt and fat are being replaced with healthy, natural, low and zero-calorie alternatives. The changing consumer Page 6 of 33

7 landscape has food manufacturers looking for natural high-intensity sweetener alternatives such as stevia and monk fruit. However, food manufacturers have also struggled with stevia s aftertaste and astringent flavor profile. MycoTech developed ClearTaste, derived from mushrooms, which as to stevia has the effect of removing its less desirable aftertaste. ClearTaste is a natural, GMO-free and chemical-free ingredient solution that works by harnessing the natural extracts found in gourmet mushrooms. The compounds are unique to fungi and are highly effective at improving the flavor profiles of stevia and monk fruit. The initial term of the agreement is five years during which GLG will be MycoTech s preferred vendor of stevia and monk fruit products. GLG further enjoys certain exclusivities in the commercial agreement with MycoTech products and the agreement also allows GLG to work directly with MycoTech to produce new products using both companies technology in return for purchase commitments with MycoTech. GRAS Status for GLG s Enzymatically Modified Stevia On October 6, 2016, GLG announced that the United States Food and Drug Administration ( FDA ) had issued a Letter of No Objection for GLG s enzymatically modified stevia ( EMS ) product specifically EMS95. (Filing No. GRN 656). The FDA s Letter of No Objection provides that the FDA has no questions regarding GLG s conclusion supported by extensive studies, research, and in-depth consultation with GRAS Associates, LLC that its EMS95 product is Generally Recognized As Safe ( GRAS ) as a general purpose sweetener. EMS95 is part of GLG s TasteBoost TM product line, which consists of a series of enzymatically modified stevia products. GLG s EMS a natural low-calorie sweetener is produced through the enzymatic addition of glucose moieties to the original steviol glycoside structure, resulting in a mix of glucosylated steviol glycosides and steviol glycosides. The presence of glucoyslated steviol glycosides benefits products using EMS by providing enhanced taste quality and sweetness. This enhancement in taste and flavor provides a well-rounded, sugar-like low-calorie solution appropriate for a wide variety of food applications, such as dairy, snacks, baked goods, cereals, sports nutrition products, and many more. Furthermore, GLG s EMS products can be used synergistically with other caloric and non-caloric sweeteners for enhanced sweetness and taste. GLG s EMS products provide an array of choices for food manufacturers targeting consumers of all ages who are looking for healthier, tastier options. To date, GLG has received ten GRAS Letters of No Objection covering its broad array of high-purity stevia products. No other stevia company can claim such a mark. Launch of P-Pro Plus On March 9, 2016, GLG announced, in partnership with MycoTech, the launch of P-Pro Plus, a revolutionary product that complements the many benefits of pea protein with MycoTech s groundbreaking 100% natural and USDA Organic certified bitter blocker, ClearTaste, to offer a pea protein without any of the taste profile issues many food, beverage, and dietary supplement manufacturers experience with pea protein by itself. Pea protein has recently drawn a lot of attention for being highly sustainable, vegan, vegetarian-friendly, hypoallergenic, a good source of amino acids, easy to digest and a good alternative to soy protein products. Pea protein promotes not only its protein content, but also fiber, vitamins and minerals. As a legume, peas return nitrogen to the soil and are considered a highly sustainable food source. Increased demand for more sustainable protein globally and more vegan and allergen-free options is driving development of more plant-based protein sources. Pea protein products can replace a significant percentage of other proteins in many applications and Page 7 of 33

8 can offer cost savings. Furthermore, pea protein isolate can replace soy isolate on a weight-for-weight basis without a negative organoleptic impact. Adding plant protein sources to food and beverage applications presents some challenges, however, such as change in flavor profile of the finished product. The number one challenge faced by food and beverage formulators introducing or transitioning their products to include plant-based proteins, such as pea protein, remains balancing the benefits of these natural ingredients with a taste profile that appeals to the mainstream palate. The partnership between GLG and MycoTech overcomes this challenge, providing food, beverage and sport supplement companies the ability to produce natural healthful products without the bitter taste profile and off-notes that are traditionally associated with pea protein. P-Pro Plus offers not only the many benefits of regular pea protein, but also a taste profile that formulators and consumers alike will appreciate. We expect that this improved taste profile will broaden market appeal, reach new product segments and result in deeper market penetration of pea protein. P-Pro Plus is available in both conventional and organic varieties and in various mesh sizes and protein purity levels and can be tailored to your individual product needs. GLG Achieves Major Milestone in Debt Restructuring Plan On July 26, 2016, GLG announced an important milestone in the Company s plan to restructure its China-based bank loans. Additionally, the Company successfully renewed a RMB 7 million bank loan with the Huishang Bank on July 1, As of July 20th, 2016, four of five of the Company s 100% owned Chinese Wholly-Owned Foreign Enterprises ( WOFEs ) were consolidated into a single entity (Chuzhou Runhai Stevia High Tech Company Limited or Runhai ) under Chinese law and, significantly, Runhai is approved to become a Joint Stock Company ( JSC ). This form of corporation, under Chinese law, provides it considerable opportunities to raise capital. For example, Runhai will now be able to add Chinese investors, raise equity capital in China, and convert China-based debt into equity in the JSC. Post consolidation of the four China subsidiaries, the Company retains its 100% ownership of Runhai and all of the consolidated assets of the previous four China subsidiaries. The three subsidiaries consolidated into Runhai are: Anhui Bengbu HN Stevia High Tech Development Company Limited Qingdao Runhao Stevia High Tech Company Limited Dongtai Runyang Stevia High Tech Company Limited One of the key outcomes of the conversion of Runhai into a JSC was the underlying agreed valuation of the consolidated Runhai entity. Runhai s total investment approval by the China Government is USD 120 million and its net assets are valued at USD 42 million. The difference between the asset valuation and net assets value provides Runhai USD 78 million available for debt conversion, additional working capital or equity raises. GLG s subsidiary Qingdao Runde Biotechnology Co., Ltd. remains a 100% owned WOFE of GLG. One particular benefit of reforming the Company s Chinese holdings into a JSC is that the limitations previously foreclosing the Company from access to Chinese debt and capital markets are gone. As a JSC, Runhai will be eligible to have its Chinese-held debt converted into equity shares at the subsidiary level, such that a major portion of that debt could be removed from the Company s balance sheet. GLG, with the PRC government s support, is in active discussions with Runhai s Chinese debt-holders to negotiate terms for a debt-equity swap, and is exploring multiple options for access to valuable working capital. The Company expects to retain a majority controlling interest in Runhai after any expected debt conversion into equity in Runhai. Further, Page 8 of 33

9 Runhai will have the ability to solicit Chinese capital markets and investors for working and other capital, bolstered by a more attractive balance sheet and a strong appetite in China for growth opportunities. The process to convert the four WOFEs into a single consolidated Joint Stock Company was unusually complex. To give perspective on this major accomplishment, GLG management had to work through ten different government agencies across three provinces and four cities in order to obtain the relevant approvals necessary to accomplish this important milestone. With this foundational milestone completed, GLG s plan is to restructure its China debt by availing itself of one or more options now open to the Company. The Company also expects to gain access to new sources of working capital to facilitate its plans for substantial growth in its stevia, monk fruit, and GLG Naturals+ businesses. Launch of GoZero Solutions On February 1, 2016, GLG announced the launch of GoZero Solutions. This innovative portfolio provides GLG s customers with unparalleled natural and Non-GMO zero-calorie sweetener options and proprietary formulations tailored to our customers specific calorie reduction needs. The challenges to global food and beverage companies are well documented with respect to the need for reduced amounts of sugar in formulations. The global per capita sugar consumption peaked in the late 1990 s; however, it has been declining ever since due to an increase in health awareness and prevalence of diet-related health conditions, such as diabetes. Moreover, government regulations and guidelines, such as sugar taxes in the US and Mexico, and new dietary guidelines limiting the amount of added sugar in foods have made it challenging for food and beverage manufacturers to continue to use the same amounts of sugar in their formulations as they have used in the past. Added to this challenge, consumers willingness to consume artificial sweeteners has been declining due to a general mistrust in synthetic chemical compounds. In fact, consumers are increasingly looking to incorporate natural, plant-based ingredients in their diets. The movement of the market toward zero-calorie, natural sweeteners has placed immense pressure on marketing, R&D and procurement teams to reformulate to reduce sugar and artificial sweeteners in their products. However, the transition to stevia as a natural zero calorie sweetener has proved challenging due to its known aftertaste issues such as astringency and bitterness. But things are changing for the better, as GLG introduced its newest product line to global food and beverage companies GoZero Solutions to address all these challenges with going zero. GLG s GoZero Solutions offer: 1. Largest portfolio containing the most complete set of zero-calorie, natural sweeteners including stevia, enzymatically modified stevia, monk fruit and bitter blockers 2. Better tasting stevia and monk fruit with ClearTaste natural bitter blocker 3. Custom formulations for customers 4. Fast prototyping of reduced or zero calorie formulations for R&D groups 5. Superior taste and flavor profile tailored to specific food matrices 6. Fast response and support from our experienced support team 7. Cost effective solutions 8. Clean labels 9. Reduction in use of sugar while maintaining taste 10. Removal of artificial sweeteners from the formulation 11. Halal, Kosher, Non-GMO, and natural solutions Page 9 of 33

10 12. Organic and conventional format GoZero Solutions is the result of over 15 years hard work of more than 60 agricultural scientists, product innovation and food application specialists, and food engineers. This concerted effort enabled GLG to formulate a diverse product portfolio applicable to a wide range of food, beverage, and dietary supplement products that are cost-effective and superior in taste, flavor, and quality. Major Advances in High-Purity Leaf for Reb M On February 29, 2016, GLG announced a major agricultural breakthrough in its agricultural R&D program. Through this program, GLG aims to revolutionize the global food and beverage industry by providing companies with the ability to replace sugars and artificial sweeteners with naturally-sourced Rebaudioside M ( Reb M ). The program s latest accomplishment is a stevia leaf strain with Reb M levels more than ten times higher than conventional stevia leaf. Reb M, one of several steviol glycosides found in the stevia plant, is highly desired in the industry as a natural, zero-calorie sugar and sweetener replacement, one that very closely resembles sugar. To date, the impediment to utilizing Reb M has been its scarce presence in the stevia leaf, making commercial use cost-prohibitive. Bringing a naturally-sourced Reb M extract to the market on a commercial scale requires a dramatic increase in the presence of Reb M glycosides in the leaf. A dramatic increase in Reb M is just what GLG achieved. Through development of its Reb M seedling using its non-gmo patented breeding methodology, GLG has now produced more than a 1000% increase in Reb M levels in stevia leaf. Conventional stevia leaf has Reb M concentrations at less than 0.1% of dry leaf weight, and less than 1% of total steviol glycosides ( TSG ). In GLG s seedling, Reb M constitutes over 1% of dry leaf weight, and over 8% of the TSG s. Further, TSGs constitute about 13% of dry leaf weight in GLG s new seedling, which is above the industry average of 10-12% of dry leaf weight. The 1000% increase in Reb M glycosides in its new variety is the result of two key factors: (1) an expanded Reb M seedling development program that GLG undertook in 2015 and (2) the 25 years experience of its chief agronomist. The 2015 program involved evaluating thousands of different stevia strains, requiring an extensive program to identify and promote the most promising strains. GLG s 2014 breakthrough with its high Rebaudioside C ( Reb C ) seedlings clearly demonstrated the promise of its patented Non-GMO seedling hybridization technology to significantly increase scarce glycosides. And in 2015, GLG announced a stevia leaf strain with significantly enhanced levels of both Rebaudioside D ( Reb D ) and Reb M. This latest achievement, focused specifically on Reb M, further demonstrates GLG s agricultural prowess. GLG is in the process of filing for patent protection for its Reb D and Reb M seedlings. And GLG has filed two GRAS applications with the FDA for high-purity Reb D (GRN 548) and Reb M (GRN 512), with purity levels ranging from 80% to 95% to be used as a sweetener. New Reb C Gold Leaf Varietal Approaches 80% Reb C Content On October 5, 2016, GLG announced another significant update from its agricultural breeding program. Through its continued development of its Reb C Gold varietal, GLG has produced a Reb C varietal with unprecedented levels of Reb C over 79% relative to total steviol glycosides. The TSG content on a dry weight basis is an impressive 13% of leaf weight. This success builds on GLG s prior achievement, announced in late 2014, of the first strain of Reb C Gold with Reb C levels at 53%. Reb C (short for Rebaudioside C) has historically been a scarce glycoside, typically found in leaf at levels of only 5 to 10%. GLG s 2014 announcement demonstrated its ability to achieve multiple factor Page 10 of 33

11 increases in the levels of relatively scarce glycosides. That GLG has been able to up the levels by another 50% reflects well on GLG s agricultural prowess. It also bolsters GLG s ability to efficiently produce commercial quantities of high-purity Reb C extracts. GLG s agricultural program is an ambitious endeavor to produce all through non-gmo breeding a number of specialized stevia varietals especially rich in one or more of Reb A, Reb C, Reb D, or Reb M. Last year, this program worked with over 5,000 samples and varieties of leaf. In the 2016 program, the GLG agriculture R&D team is expecting to have over 10,000 samples and varieties to analyze for plants with high amounts of Reb A, C, D, or M. Given the size and scope of GLG s program, its many years of specialized experience in breeding stevia, and its past successes, GLG expects to announce further achievements from this program later this year. Whether Reb A, Reb C, Reb D, or Reb M or all of the above the development of GLG s specialized varietals could be transformative for the stevia industry. The Reb C Gold varietal has proven a great success. GLG has demonstrated its ability to go from discovery to initial planting in approximately two years. GLG has also confirmed its ability through lab trials with recently harvested Reb C Gold leaf to use simplified production processes that produce high-purity Reb C extracts at greatly reduced costs. These results underscore the promise made by GLG in 2014 that Reb C Gold would enable it to achieve economically viable commercial production of high-purity Reb C extracts. In 2017, GLG expects to plant commercial scale quantities of the Reb C Gold seedling. Dr. Luke Zhang, CEO and Chairman of GLG, commented: We are excited to begin producing high-purity Reb C in commercial quantities this coming year. Today s announcement of even greater Reb C levels highlights GLG s unique strengths in stevia agronomics. Given the increasing pace in the development of specialized varieties, I expect that we will continue to see a number of exciting new varieties coming from GLG s research team. These future varieties, with particular focus on Reb D and Reb M, are expected to make a big splash in the stevia industry. In February 2015, GLG received its FDA Letter of No Objection regarding its high-purity Reb C extracts as GRAS (Generally Recognized as Safe) for use as a sweetener. (GRN 536.) Annual General Meeting The Company held its Annual General Meeting on June 28, 2016, in Vancouver, B.C. The shareholders voted in all nominated directors, with favorable votes for each exceeding 99%. Dr. Luke Zhang continues as Chairman of the Board and Chief Executive Officer and Brian Palmieri continues as Vice Chairman of the Board. Page 11 of 33

12 Results from Operations The following results from operations have been derived from and should be read in conjunction with the Company s annual consolidated financial statements for 2015 and the condensed interim consolidated financial statements for the nine-month period ended September 30, In thousands Canadian $, except per share amounts Revenue 3 Months Ended September 30 % Change 9 Months Ended September 30 % Change Revenue $4,155 $8,808 (53%) $14,025 $23,008 (39%) Cost of Sales ($4,283) ($8,699) (51%) ($14,050) ($21,686) (35%) % of Revenue (103%) (99%) (4%) (100%) (94%) (6%) Gross Profit (Loss) ($127) $109 (217%) ($25) $1,323 (102%) % of Revenue (3%) 1% (4%) (0%) 6% (6%) Expenses ($2,644) ($2,603) 2% ($8,602) ($7,770) 11% % of Revenue (64%) (30%) (34%) (61%) (34%) (28%) (Loss) from Operations ($2,771) ($2,495) 11% ($8,627) ($6,447) 34% % of Revenue (67%) (28%) (38%) (62%) (28%) (33%) Other Expenses ($2,520) ($3,355) (25%) ($5,031) ($7,682) (35%) % of Revenue (61%) (38%) (23%) (36%) (33%) (2%) Net (Loss) before Income Taxes ($5,291) ($5,850) (10%) ($13,657) ($14,129) (3%) % of Revenue (127%) (66%) (61%) (97%) (61%) (36%) Net (Loss) ($5,291) ($5,850) (10%) ($13,657) ($14,129) (3%) % of Revenue (127%) (66%) (61%) (97%) (61%) (36%) Loss per share (LPS, Basic & Diluted) ($0.14) ($0.15) (10%) ($0.36) ($0.37) (3%) Other Comprehensive Income (Loss) $623 ($289) (315%) $810 $ % % of Revenue 15% (3%) 18% 6% 2% 4% Total Comprehensive (Loss) ($4,668) ($6,139) (24%) ($12,847) ($13,774) (7%) % of Revenue (112%) (70%) (43%) (92%) (60%) (32%) Revenue for the three months ended September 30, 2016, was $4.2 million compared to $8.8 million in revenue for the same period last year, a decrease of 53%. The majority of the revenue decline was due to reduced monk fruit sales and reduced GLG Naturals+ sales. International sales continue to be the dominant component of consolidated revenues, at 90% in the third quarter of 2016 (compared to 96% for the comparable period in 2015). The decrease in monk fruit revenue is driven primarily by a decline in sales volume. In 2016, the Company transitioned to a new sales model selling bulk amounts to its global distributor and selling to direct customers in the dietary supplement space. With respect to GLG Naturals+, the 2015 revenues comprised one customer whose product needs have since shifted. Please see the Outlook section further below for more details on the Company s expectations for its different product lines. Revenue for the nine months ended September 30, 2016, was $14.0 million, a decrease of 39% compared to $23.0 million in revenue for the same period last year. Stevia sales increased by 6% over the same period in More significantly, international stevia sales increased by 24%, reflecting increasing demand for GLG s high-purity stevia extracts sold internationally (sales in China are typically lower-purity extracts). The increase in international stevia sales was offset by a 66% decrease in monk fruit sales and a 100% decrease in GLG Natural+ sales relative to the first nine months of 2015, for the same reasons as described above for the Page 12 of 33

13 three-month sales comparison. International sales accounted for 89% of total sales in the first nine months of 2016 compared to 88% in the comparable period of Cost of Sales For the quarter ended September 30, 2016, the cost of sales was $4.3 million compared to $8.7 million in cost of sales for the same period last year (a decrease of $4.4 million or 51%). Cost of sales as a percentage of revenues was 103% for the third quarter 2016, compared to 99% for the comparable period (a 4 percentage point increase). Cost of sales as a percentage of revenues for the third quarter, relative to the same period in 2015, improved for both stevia and monk fruit (approximately 10% improvement) offset by a significant increase in higher idle capacity charges (approximately 14% negative impact). Capacity charges charged to the cost of sales ordinarily would flow to inventory and are a significant component of the cost of sales. Only two of GLG s manufacturing facilities were operating during the third quarter of 2016, and capacity charges of $0.9 million were charged to the cost of sales (representing 21% of cost of sales) compared to $0.6 million charged to the cost of sales in same period of 2015 (representing 7% of cost of sales). For the nine months ended September 30, 2016, the cost of sales was $14.0 million compared to $21.7 million for the same period of last year (a decrease of $7.7 million or 35%). Cost of sales as a percentage of revenues was 100% for the first nine months of 2016, compared to 94% in the comparable period in 2015 (a 6 percentage point increase). Cost of sales as a percentage of revenues for the first nine months of the year, relative to the same period in 2015, improved for both stevia and monk fruit (approximately 3% improvement) offset by a significant increase in higher idle capacity charges (approximately 9% negative impact). Capacity charges charged to the cost of sales ordinarily would flow to inventory and are a significant component of the cost of sales. Only two of GLG s manufacturing facilities were operating during the first nine months of 2016, and capacity charges of $2.5 million were charged to the cost of sales (representing 18% of cost of sales) compared to $2.0 million charged to the cost of sales in same period of 2015 (representing 9% of cost of sales). The key factors that impact stevia and monk fruit cost of sales and gross profit percentages in each period include: 1. Capacity utilization of stevia and monk fruit manufacturing plants. 2. The price paid for stevia leaf and monk fruit and their respective quality, which are impacted by crop quality for a particular year/period and the price per kilogram for which the stevia and monk fruit extracts are sold. These are the most important factors impacting the gross profit of GLG s stevia and monk fruit business. 3. Other factors which also impact stevia and monk fruit cost of sales to a lesser degree include: water and power consumption; manufacturing overhead used in the production of stevia and monk fruit extract, including supplies, power and water; net VAT paid on export sales; exchange rate changes; and depreciation. Page 13 of 33

14 GLG s stevia and monk fruit businesses are affected by seasonality. The harvest of the stevia leaves typically occurs starting at the end of July and continues through the fall of each year. The monk fruit harvest takes place typically from October to December each year. GLG s operations in China are also impacted by Chinese New Year celebrations, which occur approximately late-january to mid-february each year, and during which many businesses close down operations for approximately two weeks. GLG s production year runs October 1 through September 30 each year. Gross Profit Gross profit for the three months ended September 30, 2016, was negative $0.1 million (negative 3% of revenue), compared to $0.1 million (1% of revenue) for the comparable period in 2015 (a decrease of $0.2 million). The $0.2 million decrease in gross profit for the third quarter of 2016, relative to the comparable period in 2015, was attributable to: (1) the reduction in gross profit from GLG Naturals+ products of $0.4 million in the third quarter of 2016 and (2) an increase in idle capacity charges in the third quarter of 2016 of $0.3 million compared to the same quarter of 2015; these were offset by (3) the increase in gross profit of $0.5 million from stevia and monk fruit sales in the third quarter of 2016 compared to same quarter in Gross profit for the first nine months in 2016 was nil (0% of revenue), compared to $1.3 million (6% of revenue) for the same period in The $1.3 million decrease in gross profit margin in the first nine months of 2016 compared to the same period in 2015 was attributable to: (1) the reduction in gross profit from GLG Naturals+ products of $1.2 million in the first nine months of 2016 and (2) an increase in idle capacity charges in the first nine months of 2016 of $0.4 million compared to the same period in 2015; these were offset by (3) the increase in gross profit of $0.3 million from stevia and monk fruit sales in the first nine months of 2016 compared to the same period in Selling, General, and Administration Expenses Selling, General and Administration ( SG&A ) expenses include sales, marketing, general and administration costs ( G&A ), stock-based compensation, and depreciation and amortization expenses on G&A fixed assets. A breakdown of SG&A expenses into these components is presented below: In thousands Canadian $ 3 Months Ended September 30 % Change 9 Months Ended September 30 % Change G&A Exp ($2,000) ($2,029) (1%) ($6,654) ($6,599) 1% Stock Based Compensation Exp ($256) ($340) (25%) ($761) ($688) 11% Amortization Exp ($388) ($235) 65% ($1,187) ($483) 146% Total ($2,644) ($2,603) 2% ($8,602) ($7,770) 11% G&A expenses for the three months ended September 30, 2016, was $2.0 million, compared to $2.0 million in the same period in Stock-based compensation was $0.3 million for the three months ended September 30, 2016, compared to $0.3 million for the comparable period in The number of common shares available for issue under the stock compensation plan is 10% of the issued and outstanding common shares. During the quarter, compensation from vesting stock-based compensation awards was recognized, due to previously granted options and restricted shares. G&A-related depreciation and amortization expenses for the three months ended September 30, 2016, were $0.4 million compared with $0.2 million for the same quarter of Page 14 of 33

15 G&A expenses for the first nine months ended September 30, 2016, was $6.7 million compared to $6.6 million in the same period in Stock-based compensation was $0.8 million for the nine months ended September 30, 2016, compared with $0.7 million in the same quarter of During the nine-month period, compensation from vesting stock-based compensation awards was recognized, due to previously granted options and restricted shares. G&A-related depreciation and amortization expenses for the nine months ended September 30, 2016, were $1.2 million compared with $0.5 million for the same quarter of Other Expenses In thousands Canadian $ 3 Months Ended September 30 % Change 9 Months Ended September 30 % Change Other (Expenses) ($2,520) ($3,355) (25%) ($5,031) ($7,682) (35%) % of Revenue (61%) (38%) (23%) (36%) (33%) (2%) Other expenses for the three months ended September 30, 2016, was $2.5 million, a $0.9 million improvement compared to $3.4 million for the same period in The decrease in other expenses for the third quarter of 2016 of $0.9 million is attributable to (1) a decrease in interest expenses ($0.1 million) and (2) an increase in foreign exchange gain ($0.8 million). Other income and expenses for the nine months ended September 30, 2016, was $5.0 million, a $2.7 million decrease compared to $7.7 million for the same period in The decrease in other income and expenses for the first nine months of 2016 of $2.7 million is attributable to (1) an increase in bad debt recovery ($0.2 million), (2) a decrease in inventory obsolescence ($0.1 million), (3) an increase in foreign exchange gain ($2.8 million), and (4) an increase in other income ($1.4 million); these were offset by (5) a decrease in sales tax recovery ($1.6 million) and (6) an increase in interest expenses ($0.2 million). Foreign Exchange Gains (Losses) Exchange rates Noon rate (as compared to the Canadian $) 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec U.S. Dollars Chinese RMB Exchange rates Noon rate (as compared to the US $) 30-Sep 30-Jun 31-Mar 31-Dec 30-Sep 30-Jun 31-Mar 31-Dec Chinese RMB GLG reports in Canadian dollars but earns revenues in US dollars and Chinese renminbi ( RMB ) and incurs most of its expenses in RMB. Impacts of the appreciation or depreciation of the RMB against the Canadian dollar are shown separately in Accumulated Other Comprehensive Income ( AOCI ) on the Balance Sheet. As at September 30, 2016, the exchange rate for RMB per Canadian dollar was compared to the exchange rate of as at December 31, 2015, reflecting a depreciation of the RMB against the Canadian dollar. As at September 30, 2016, the exchange rate for USD per Canadian dollar was compared to the exchange rate of as at December 31, 2015, reflecting a depreciation of the USD against the Canadian dollar. The Page 15 of 33

16 balance of the AOCI was $12.4 million on September 30, 2016, compared to a balance of $11.5 million as at December 31, The foreign exchange gain or loss is made up of realized and unrealized gains or losses due to the depreciation or appreciation of the foreign currency against the Canadian dollar. Foreign exchange gain was $0.1 million for the third quarter of 2016 compared to the foreign exchange loss of $0.8 million for the comparable period in Foreign exchange gain was $1.1 million for the nine-month period in 2016 compared to the foreign exchange loss of $1.7 million for the comparable period in The majority of the foreign exchange losses were due to the USD-denominated debt held by the Company. The table above shows the change in the Canadian dollar relative to the US dollar from December 31, 2014, to September 30, 2016, and the exchange rate movement for the Canadian dollar relative to the US dollar and RMB as shown above. Net Loss In thousands Canadian $ 3 Months Ended September 30 % Change 9 Months Ended September 30 % Change Net Loss ($5,291) ($5,850) (10%) ($13,657) ($14,129) (3%) % of Revenue (127%) (66%) (61%) (97%) (61%) (36%) For the three months ended September 30, 2016, the Company had a net loss of $5.3 million, a decrease of $0.5 million or a 10% improvement over the comparable period in 2015 ($5.8 million loss). The $0.5 million decrease in net loss was driven by (1) a decrease in other expenses ($0.8 million), which was offset by (2) a decrease in gross profit ($0.2 million) and (3) an increase in G&A expenses ($0.1 million). For the nine months ended September 30, 2016, the Company had a net loss of $13.6 million, a decrease of $0.5 million or 3% over the comparable period in 2015 ($14.1 million loss). The $0.5 million decrease in net loss was attributable to (1) a decrease in other expenses ($2.6 million), which was offset by (2) a decrease in gross profit ($1.3 million) and (3) an increase in G&A expenses ($0.8 million). Comprehensive Loss In thousands Canadian $ 3 Months Ended September 30 % Change 9Months Ended September 30 % Change Net Loss ($5,291) ($5,850) (10%) ($13,657) ($14,129) (3%) Other Comprehensive Income (Loss) $623 ($289) (315%) $810 $ % % of Revenue 15% (3%) 18% 6% 2% 4% Total Comprehensive Loss ($4,668) ($6,139) 0% ($12,847) ($13,774) (7%) The Company recorded total comprehensive loss of $4.7 million for the three months ended September 30, 2016, comprising $5.3 million of net loss and $0.6 million of other comprehensive income. The Company recorded total comprehensive loss of $6.1 million for the three months ended September 30, 2015, comprising $5.9 million of net loss and $0.2 million of other comprehensive income. The Company recorded total comprehensive loss of $12.8 million for the nine months ended September 30, 2016, comprising $13.6 million of net loss and $0.8 million of other comprehensive income. The Company recorded total comprehensive loss of $13.8 million for the nine months ended September 30, 2015, comprising $14.1 million of net loss and $0.3 million of other comprehensive income. Page 16 of 33